So, you fell for the crypto craze and bought just a few tokens to be on the safe side. Next agenda on your list should be to increase your portfolio, but actively trading crypto requires hours of studying and that’s hard to afford with all the current demands of your life. And even after studying, you’re still bound to incur some losses when you begin. So here comes the question. What are the easiest and safest ways to earn passive income with crypto?
Increasing your cryptocurrency portfolio hasn’t always been this easy, a few years ago enthusiasts were limited to arduously mining, trading or the traditional hodl, but new innovations like DeFi, smart contracts and proof of stake mechanisms have ushered in new methods. Now increasing your crypto portfolio requires minimal effort, it even happens while you sleep. In this article we’ll reveal a few ways to generate passive crypto income.
Methods to earn passive income in Crypto
Unlike the processes involved in mining proof-of-work cryptocurrencies like Bitcoin and Ethereum, the proof-of-stake mechanism requires users to pledge a certain amount of tokens for an opportunity to become block validators. For this they are rewarded with a percentage of transaction fees. Hence, Staking is the simple process of committing your crypto assets by locking up a specific number of tokens for a given duration in a liquidity pool to aid the smooth operation of the network. Stakers earn governance tokens for their pledge. A host of platforms offer users the opportunity to stake assets, e.g., Kraken, BitStamp, Binance.
Lending in crypto isn’t much different from its traditional fiat alternative. Crypto loans are simply loans backed by cryptocurrency. Lenders can earn yields when they deposit crypto assets to be available for loans. This is done via a lending platform which acts as an intermediary between lenders and borrowers, offering various Annual Percentage Yields (APY) to lenders. Such platforms include CoinRabbit, Compound, and MakerDAO.
Types of Lending include:
Peer-to-peer Lending – With smart-contracts, P2P lending has evolved. Now both parties involved (lenders and borrowers) can safely enter a loan agreement without the need for a third-party. Smart contracts ensure all conditions are met before execution.
Centralized Lending – This involves the presence of an intermediary or governing body overseeing all aspects of the loan, including the collateral. In centralized lending, the borrower cannot access his collateral, this would be in the possession of the lender until debt is paid.
Decentralized lending – In decentralized lending borrowers can directly take loans from the blockchain without the need of an intermediary. This loan is secured by a smart contract which ensures the transactional safety of all parties involved.
No need for head itching, in the crypto space the idea of borrowing doesn’t necessarily equate to a loss. When a collateral token is deposited, up to double of another token is received as the loan.
- The collateral token is holding, and its value may increase over time, same situation as if it was left in your wallet.
- The loaned token can be used to stake for possible profit.
This is another way to earn crypto as you go. There are various projects offering users additional tokens simply for gaining an extra user. Invitees are rewarded with project tokens for their marketing efforts. Like Crypto.com referral program earning users $50 in MCO tokens.
This is a common marketing approach by many projects. It involves the distribution of tokens to new and existing members of the community in a bid to spark or revive an interest in the project. Such airdrops include the 5 million LEDU airdrop for project creators.
This is a means of earning proof-of-work based cryptocurrency tokens (e.g., Bitcoin) by employing the mining services of a third-party. The third-party takes care of all necessities for the coin to be mined, such as, Computer equipment, power cost, heat, etc. All customers need to do is register and sign the mining contract.
Traditional buy and Hodl
The option of holding for passive earning is also always available. As the first and most common method, it requires the lowest effort and DYOR. This method also comes with its risks as the value of coins held could take the opposite direction, leaving holders Rekt.
Innovations in blockchain have come with newer ways to increase earnings. Though methods might be new, they all come with their unique risks even if you choose to simply hold. The crypto space is filled with opportunities and if you’ve been on the lookout for ways to passively earn crypto, this article should suffice.